Personal Property Securities Act (PPSA)
The Personal Property Securities Act 2009 (Commonwealth) (“PPSA”) is arguably one of the more important pieces of legislation effecting business that has been implemented this decade.
The PPSA establishes the Personal Property Security Register (“PPSR”) as a register of interests of third parties in property held outside of their possession. For example, if you have a company structure that sees one company owning the assets, and leasing the assets to the second company, that interest in the leased goods would have to be registered on the PPSR in order for the Lessor (first company) to obtain the benefit of a protected interest.
Additionally, all contracts that previously provided for “retention of title” clauses, have been rendered inferior to an interest that is registered on the PPSR. For example, if you sold goods to another party without first receiving payment, then an interest should be registered on those goods until payment is received in order to protect the interest in those goods.
The consequences of failing to understand the requirements under the new regime are that a creditor of a person or company who possesses your goods can take a priority in those goods, notwithstanding that the goods belong to you as a third party.
As with the old system of registered charges, the “first in time rule” applies to the extent that an earlier registered interest will take priority over a later registered interest, so it is especially important to register your interest as soon as your goods leave your possession.
Businesses need to be aware of the provisions of the PPSA and the need to register interest in the PPSR. Businesses should review their terms and conditions of trade to ensure that the rights and obligations relating to security interests are properly adjusted to reflect the business’ needs.
Businesses must ensure that they register their interests, (particularly with respect to intercompany loans, leases, or possession) to ensure that their interests are properly protected, and that future or other creditors of their clients are on notice of the interest. The importance of this cannot be understated. For example, in a recent decision of the Court, a large equipment distributor sold goods on credit that the purchaser had obtained finance for. The vendor did not register its interest. The finance company did register its interest. When the purchaser entered Liquidation, the financier’s interest took priority despite the title in the equipment being the vendor’s until fully paid for.
The team at Access Law Group is experienced at assisting their clients to register interests, amend their terms and conditions to reflect the needs of the business, and in resolving disputes concerning whose interest should take priority under the new regime.
Please contact us for more information or assistance.